Lesotho, known as the Mountain Kingdom, may be one of the smallest countries in Africa, yet it has one of the most positive economic outlooks. Growth, for example, is estimated at 1.8% for 2022/23, rising to 2.3% in 2023/24.

According to Molise Ramaili, interim CEO of the Lesotho National Development Corporation (LNDC), this accelerated growth is largely due to a strong focus on sectors such as manufacturing, particularly that of the automotive industry, agriculture, tourism, electronics, food and beverages, creative arts, tech and innovation (inclusive of energy), and cement. ‘These are sectors that have been identified as priorities if the LNDC is to fulfil – and go beyond – its government mandate, which in part says it must “initiate, promote and facilitate the development of manufacturing and processing industries, mining and commerce in a manner calculated to raise the level of income and employment in the country”.’

The LNDC is, however, not simply just tasked with raising employment, but also with driving the country’s National Strategic Development Plan II. To do so, it requires an aggressive investment campaign that would not be possible to market if it wasn’t able to ensure the delivery of excellent and speedy services to its clientele.

‘I believe we have been relatively successful to date, although to achieve all the varied objectives – such as investment promotion and facilitation, aftercare services, access to finance and investment incentives – we must continue to diversify and deepen our regional and international manufacturing efforts to reach the pinnacle of our success. This requires us to intensify our efforts in sourcing high-value investments from within and externally.’

It may appear to be an unenviable task, but for the LNDC, as Ramaili explains, it’s really about highlighting the region’s strengths, which are many and varied.

‘For example, in the mining sector we produce some of the highest dollar-per-carat diamonds in the world. This has always been an attractive opportunity for new market investment entrants,’ he says. ‘We are also very strong in the textile, apparel and footwear sector, where Lesotho is rated among the top four producers in Africa, notably garment production for companies like Levis Strauss, Gap and the Children’s Place. This is also the sector that employs the highest number of Basotho citizens.’

The Made in Lesotho initiative attached to the clothing and footwear industry has been attracting foreign investment, largely because the country is regarded highly for its fair and ethical labour standards, regulation and highly literate human capital. It’s therefore no surprise that current investor enquiries in this sector centre on the production of denim garments, which have a high potential for export and trade.

Ramaili is also excited that investor interest is growing rapidly in its automotive industry, which currently supplies high volumes of labour-intensive automotive components to South Africa’s auto sector.

‘Our competitive advantage here – and, in fact, across all our manufacturing facilities – is that we offer very competitive wages, lower fuel costs and overall lower production costs in the region,’ he says.

It’s a similar situation across Lesotho’s electric appliance and electrical components production, where the country is feeding China, the EU and UAE’s collective demand for switches, relays, fuses, surge suppressors, plugs, sockets and lamp holders, among other items. ‘There are high returns here for investors if they want to add to this rapidly growing industry, or that of the existing production of televisions, sound recorders and producers that we export to Southern African countries,’ says Ramaili.

One of the investor-attention grabbers associated with the country is the Lesotho Highlands Water Project, which is currently reaching its peak in construction. This project was established by a 1986 treaty between the governments of Lesotho and South Africa, and is considered a major earner from its supply to South Africa of one of the purest water sources in the world.

Ramaili confirms that there is very little microbiological and chemical contamination in Lesotho’s water. ‘And, with half of the power demand in Lesotho supplied from this, and other planned dams, the country has the opportunity to be 100% energy efficient. This, we believe, will attract investors interested in sustainable energy and further will allow us to export bulk water to Botswana, which sweetens the pot somewhat.’

Agri- and agroprocessing is proving to attract significant interest from investors, largely because Lesotho is well-endowed with what Ramaili describes as a ‘pristine agricultural climate, with an abundance of pure water to support the growth of crops and processing’. Government is strongly supporting the commercialisation of the agricultural sector in the form of low tax rates of 10% over the normal 25%.

‘Fruits such as peaches, apples and blueberries thrive in our highland climate and are not impacted by seasonal climates, as is the case elsewhere,’ says Ramaili. ‘This means we can produce fruits year-round for export. It’s the same for salmon farming, where export is guaranteed to Japan and South Africa. The spin-off from salmon and fruit production is new opportunities in developing cold-chain management.

‘The LNDC is aware of the attractiveness of our agro sector and is providing support to our investors by consolidating land, and we have simplified the process for setting up agroprocessing businesses. The Lesotho government has plans to invest in greenhouses, plants and farms that can be leased to investors, thereby reducing the costs to those who wish to set up their businesses in the country,’ says Ramaili.

The list of investor opportunities is so remarkable that the LNDC has established a development finance department as part of its strategic plan, which in turn prompted the subsequent design of a number of instruments, namely the equity fund, quasi equity and project preparation facility, the partial credit guarantee (PCG) and supply-chain finance.

‘Review studies informed us that we needed to restructure our existing PCG, and prioritise project preparation instruments to build a pipeline of bankable business opportunities for equity participation and attraction of private capital,’ according to Ramaili. ‘But we also have other financing instruments, including one for trade finance, and another for small and medium enterprises.

‘In addition, we are supported by reputable banks like First National, Standard Lesotho Bank and Lesotho PostBank.’

As of the second quarter of 2023, the LNDC has been focused on promoting its domestic private sector through the facilitation of access to finance, markets, infrastructure and FDI partnerships. This, Ramaili says, will ‘ensure intergenerational value, which embraces economic, social and environmental responsibility. We are utilising our nation’s competitive advantage to create new industries, anchored by Lesotho’s good governance principles, best business frameworks, and a proven culture of results’.

Investors will be surprised at the lengths to which the LNDC goes to ensure that Lesotho’s opportunities are tapped into effortlessly. For example, the corporation also provides professional services, such as facilitating work permits and helping FDIs have a presence in the country.

These services are underpinned by a healthy market-access profile, with six agreements in place that ensure duty- and quota-free access to international and regional markets.

‘All these opportunities are supported with world-class infrastructure, such as serviced land and factory space within industrial parks, with a special economic zone comprising a pharmaceutical park, agro pole, manufacturing, smart city and logistics hub under development,’ says Ramaili.

With all these positives, one may forget that Lesotho is still a developing nation. Yet with projections that the global economy will slow down even further than it has in the past three years, Lesotho just may attract more interest than it expects from investors seeking new markets, and customers looking for new suppliers.

‘We are open to interest in various sectors,’ says Ramaili. ‘Particularly if those respond to our aim to transform our country from a consumer-based economy to a producer- and export-driven one.’

By Kerry Dimmer
Image: Chanelle Nuadt/Habari Media